Friday, January 10, 2025

After a rough September, here are reasons for optimism from our CEO

There is no denying that September was a polarizing month in Mexico.

It was the long-anticipated (or dreaded, depending on your political affiliation) month in which the Morena party and its allies gained majority control in Congress. As President-elect Claudia Sheinbaum does not take power until Oct. 1, September has also been AMLO’s last month in power, and he used it to push through some of his constitutional reforms in a Morena-controlled legislature.

First up, the judicial reform was quickly passed. Next was a proposal to move the National Guard under military control. Both of these proposals received heavy criticism from the opposition as well as from many international observers and experts. I have had dozens of conversations with people on both of these issues, and it’s easy to understand why there has been so much polarization and high emotion.

At the risk of an oversimplified explanation, those against the judicial reform argued that the proposal to elect all federal judges nationwide would reduce the quality and integrity of the judicial branch. A weakened judicial system, they reasoned, affects the integrity of the rule of law. This, in turn, discourages investor confidence, which ultimately affects the amount of investment and hurts the economy and the country. Strong arguments were made that this would potentially kill the golden goose of the nearshoring opportunity.

Those in favor of the judicial reform reasoned that the current system was already far from perfect, with serious flaws and high levels of corruption. They argued that the direct election of judges would, in fact, give more “power to the people” and reduce the level of corruption.

On the issue of the National Guard, those against the move to put them under military control argue that the military has already gained far too much power under AMLO. The past six years have seen the military building airports, passenger railways, and hotels, as well as beginning to operate the commercial airline Mexicana.

They also argue that the military has been ineffective against the cartels and that putting the National Guard under their control could lead to an increased militarization of what is supposed to be a civilian force.

Those in favor of the move have argued that the National Guard under military control will professionalize the force and prevent the notorious corruption that afflicted the federal police.

Over the past month, the anxiety from the opposition has reached a fever pitch, with fears ranging from “missing the nearshoring opportunity” to “jeopardizing the USMCA agreement” to a “significant devaluation of the peso” to “a judicial system taken over by the cartels.”

If any of these come true, the consequences could be terribly damaging to the country. But in reality, only time will tell if the worst fears are realized. It is with that backdrop in mind that I think we need to step back and reflect on two important points.

First, we are in “crazy talk” time on both sides of the border. In Mexico, September is the month in which AMLO can do what he wants with the Morena mandate, as Sheinbaum awaits, perhaps hoping he doesn’t do anything too polarizing (which clearly didn’t happen).

In the United States, one presidential candidate is talking about “the end of America” if he doesn’t win, while the other candidate talks about “the end of democracy” if she doesn’t win.

Viewed from a Mexican point of view, neither one of these scenarios is reassuring when you hear your big brother to the north talking in such stark terms. But we need to remember that we are in the heat of the election season, the rhetoric is off the charts, and it will likely calm down in a few months.

The temperature is very high on both sides of the border. U.S. political and business leaders have been expressing significant concerns about whether Mexico is still a “business-friendly” country, given AMLO’s recent moves.

That’s a fair point, but imagine being a Mexican political or business leader looking north at a second failed assassination attempt of a presidential candidate in two months, threats of up to 200% tariffs against your products (in clear violation of the USMCA agreement), renewed talk of a border wall and a “round-up and return of illegal immigrants like the world has never seen before.”

I think it’s fair to say that both sides have some reasonable concerns.

As troubling as the above two points might be, it’s important to remember that the U.S.-Mexico relationship is actually stronger than ever by many metrics. Record amounts of U.S. foreign direct investment into Mexico. Record amounts of Mexican exports to the U.S. Record numbers of tourists coming to Mexico by airplane, cruise ship, and car. Record numbers of expats moving to Mexico. Increased cross-border train lines being built. A significant increase in new flights between the two countries. And on, and on, and on…

It’s also important to remember that, as complicated as the U.S.-Mexico relationship might be at this time, the risks and concerns pale in comparison to other parts of the world. Mexico isn’t building up its military and provoking its neighbors. Mexico isn’t conducting cyber-attacks on the U.S., Mexico isn’t using government subsidies to help its industries dump products into the U.S. and disrupt local suppliers.

Claudia Sheinbaum, in an attempt to quell some fears, is soon meeting with a group of business leaders to address concerns and share her vision for the next six years. After her win in June, I wrote my “wish list” of things I think she needs to do to increase investor and international confidence in her administration.

All things considered, and when viewed with a global geopolitical perspective, there is much reason for optimism for both the U.S. and Mexico.

Despite the current rough patch, I am confident that both countries will continue to grow ever closer and reliant on each other. And that, I would argue, is a very good thing for the citizens of both nations and the world.

Travis Bembenek is the CEO of Mexico News Daily and has been living, working or playing in Mexico for over 27 years.

10 COMMENTS

  1. A pleasure to read such a balanced and measured article with excellent points on both sides. No doubt the countries need each other. With more than 30 million people of Mexican descent living on the north side of the wall there is little doubt that many of the good things you mention, increased trade, travel and investment, will continue. Thank you, always best to take a step back and a deep breath and wait to see what happens.

  2. As a resident in Mexico and a U.S. citizen, I’m all for Amlo’s recent moves above. I’m against nationalizing corporations and against socialist government. True socialism, a term often misused by Bernie Sanders and others, is more aptly applied to dictatorships. But I’m all for certain social “programs” that benefit “all” citizens
    like medical for all, creating or rebuilding new infrastructure, or strengthening the national military.
    military with benefit to all taxpayers. Allowing the people to vote for Supreme Court Justices, rather than ramrodded appointments by the party in power for one. In contrast, the enormous amount of taxpayer money wastefully spent for votes in the U.S. and elsewhere is egregious. particularly for a nation whose debt has now surpassed 35 Trillion. Imagine a CEO with that kind of debt asking their Board to approve tens of millions to save a mouse!
    Kamala Harris will throw her historical beliefs to the wind for anyone’s and everyone’s vote. Windmills that are killing birds, ocean animals and disrupting the ecosystem with no logical benefit, to the 300 million to Nancy Pelosi’s park, and prior to that, 30 Million USD’s to save a mouse in the same park, is lunacy. Particularly for a country with 35 trillion in debt.

  3. Mexico is not going in right direction Amlo expressed one of his best Friends is Maduro with that statement says it all….Shearbaum looks to continue same ideology stick a fork in Mexico… Cartels already are in charge very little comment of this …you all get real sell your real estate it will be worth alot Less soon

  4. It’s extremely difficult to see how the new president will substantially change tack as she is AMLOs creation, is subservient to the party and now has AMLOs son Andy in charge of strategy . . . it’s most likely more of the same but nobody will ever know what investments, jobs and taxes went elsewhere

  5. This article presents a nuanced perspective on the political landscape in Mexico following a tumultuous September. It effectively captures the polarization surrounding the recent actions of the Morena party and the outgoing administration of President AMLO, particularly regarding judicial reforms and the military’s control over the National Guard. There are valid concerns from both sides of the debate, highlighting fears about judicial integrity and militarization versus arguments for reform and professionalization. This is the first balanced approach that I have seen and is commendable, as it encourages readers to appreciate the complexity of political decisions rather than resorting to binary thinking.

  6. First, AMLO’s changes are in place. Under the new judicial system, judges will be elected by the people, the same people that gave AMLO the supermajority he needed to change the system. The judges will be nominated by Congress (controlled by MORENO) and the executive branch…again MORENO. Safe bet you’ll get MORENO friendly judges…and there go the checks and balances that keep a government in check. Plus, the military has been bought off…no chance of resistance there.
    Second, Trump is a blowhard. If elected, there’s a 50/50 chance he won’t remember his campaign promises and if he does, it would be out if character for him to follow through. Even if he tried, there are still enough sane members of Congress to kill his 200% tariff fantasy.
    I think Mexico’s economy is going to feel the effects of AMLO’s “reforms“ negatively. Peso started taking a nosedive right after the election, Mexico’s credit rating has been downgraded and MorganStanley has advised its clients not to buy Mexican. I’d love to hearScheinbaum explain all this to the business leaders in a manner that will ease their concerns.

  7. All the people of Mexico are in for a “great shock”, Nothing but more confusion and “Kaos” is going to occur. Claudia Sheinbaum meeting with a bunch of business leaders is not going to resolve anything. The “peso” is in for a big devaluation. People don’t he “fooled” by what you are hearing because more ” economic” disappointments are coming. Investors are not interested doing business under these conditions.

  8. Funny How this otherwise excellent article and the comments mention nothing about the impact of these reforms on the lower classes. Should that not be our biggest concern?

Comments are closed.

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